Good morning. My name is Brandy and I will be your conference operator today. At this time, I would like to welcome everyone to the Brandywine Realty Trust Second Quarter Earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Mr. Gerry Sweeney, President and CEO of Brandywine Realty Trust, sir, you may begin your conference.

Brandy, thank you very much, and good morning everyone and thank you all for joining us for our second quarter 2015 earnings call. On today’s call with me are George Johnstone, our Executive Vice President of Operations; Tom Wirth, our Executive Vice President and Chief Financial Officer; and Dan Palazzo, our Vice President and Chief Accounting Officer. Prior to beginning, certain information discussed during our call may constitute forward-looking statements within the meaning of the federal securities law. Although we believe estimates reflected in these statements are based on reasonable assumptions, we cannot give assurance that the anticipated results will be achieved. For further information on factors that could impact our anticipated results, please reference our press release as well as the most recent annual and quarterly reports that we file with the SEC. To start our call, as we normally do, we’ll provide an overview on our three key business plan components - operations, balance sheet, and investments. George will then discuss the status of our leasing and operating efforts, and then turn the call over to Tom for a review of our financial results and our balance sheet. You will notice that we’ve streamlined the format of our press release this quarter as well as made several additional enhancements to our supplemental information package, particularly on transactional disclosures. During the quarter, we made excellent progress on our 2015 business plan while advancing our long-term growth objectives. We are further accelerating our portfolio repositioning plan and are increasing our sales target by $120 million to $300 million for 2015. During the quarter, we also made tangible progress on our growth strategy, most notably on our development and redevelopment projects, converting one of our larger operational joint ventures into a wholly owned opportunity and recycling our land inventory. Our guidance…

Thank you, Gerry. It was an extremely actively quarter by our regional leasing teams that has our annual business plan targets nearly complete, but more importantly has allowed us to increase our spec revenue and other business plan targets. We’ve increased the spec revenue target by a net $700,000 or 2%. It’s noted, however, that outperformance by our CBD Philadelphia operation, Pennsylvania, metro DC, and Richmond yielded a $1.4 million increase, which was offset by declines in New Jersey, Delaware and California, where the pace of lease signings was slower than originally contemplated. We’re also seeing outperformance in our mark to market and capital metrics. In CBD Philadelphia, where we are 97% occupied and 99% leased, we commenced leases during the quarter that yielded a 6.9% increase on a cash basis and a 26.3% increase on a GAAP basis. For the full year, CBD leasing spreads will be 8.5% and 17.9% on a cash and GAAP basis respectively. Our CBD average lease term is 9.3 years with capital running approximately $2.27 per square foot per lease year. Overall, conditions in Philadelphia continue to improve as the market drafts off the performance of the trophy-class inventory. Second quarter market vacancy declined 11.6% while asking rents have increased 5.5% over the past 12 months. The city continues to see a number of companies relocating in from the suburbs and New Jersey. In fact, 25% of the year-to-date leasing activity has come from out-of-market tenants, and Brandywine has captured roughly 40% of those. In the Pennsylvania suburbs, we’ve improved occupancy 40 basis points to 92.4%, and we’re 94.7% leased. Leasing spreads in the Pennsylvania suburbs during the quarter were 3.3% positive and 6.2% positive cash and GAAP respectively. Average lease terms are running just shy of seven years with capital near the top…

Thank you, George. Second quarter FFO totaled $57.4 million or $0.32 per share. Some observations regarding the second quarter results - same store growth rates for the first quarter are 1.7 GAAP, 1.3 cash, both excluding net termination fees and other income. We’ve had 16 consecutive quarters of growth in the GAAP metric and 12 consecutive quarters on the cash metric going up. Other income totaled $1.2 million, slightly ahead of projections. G&A decreased to $6.8 million, in line with guidance. Interest expense totaled $27.9 million, slightly below the first quarter but in line with guidance. As projected, FFO contribution from our unconsolidated joint ventures totaled $6 million, $2.2 million below first quarter results but in line with prior quarters’ guidance. The decrease from the first quarter is primarily due to the first quarter termination fee from Solar Winds and their vacancy, which was realized on 3/31 of the first quarter. Our second quarter CAD totaled $39.5 million or $0.19 per diluted share, a 78.9% payout ratio. During the quarter, we incurred $16.5 million of revenue maintaining capital, primarily due to the sequential quarterly occupancy improvements. For the second quarter, we also incurred $12 million of revenue-creating capital and $58.8 million of redevelopment. As Gerry mentioned, our FFO guidance remains unchanged at $1.40 to $1.46. Looking at the third quarter run rate, we note the following. Property level operating income - operating income for the third quarter will be above second quarter results primarily due to the full quarter effect of Broadmoor partially offset by the anticipated asset sales, and the same store property group is anticipated to sequentially increase roughly 1.5 million due to the continued occupancy improvement. G&A for the third quarter should remain consistent with the second quarter at $6.8 million. Full year should continue to range…

Great, thank you, Tom, and thank you, George. To wrap up our prepared remarks, the second quarter results were strong. Excellent leasing and development project progress. We’re confident in the continued execution of our 2015 business plan and creating a solid growth platform for the years ahead. With that, we’re delighted to open the floor for questions. We ask, as we always do, that in the interests of time, you limit yourself to one question and a follow-up. Brandy, will you open the floor for questions?

[Operator instructions] Your first question comes from Derek Van Dijkum with Credit Suisse.

Good morning, guys. I was wondering if you could just kind of talk through the rationale of the stock buyback, given the funding of the development pipeline, the acquisitions, and then potentially paying down 2016 maturities.

Sure, we’ll tag team that, Gerry and Tom will. When we look at our development pipeline funding, what we have underway right now - and Tom did touch on a few of these points in the source and use - we have about $300 million of outstanding funding on our wholly owned properties, primarily FMC and Encino Trace. We have another $9 million to fund under the JVs, which creates a total funding requirement of about $310 million or so. We do anticipate, as we did from the beginning, that the full contribution of Encino Trace to our joint venture with DRA, that will generate plus or minus about $70 million of proceeds over the next several quarters, which leaves net development funding on our existing pipeline of about $238 million. That spend will come in really almost ratably over the next 12 months until FMC is completed, so that kind of leaves a remaining funding balance of about $130 million or so in 2015, with the balance of that in 2016. So when we looked at that, we basically indicated with the cash balances we have on hand, the increase in sale proceeds, some of the land sales funding in this year, that left us in a very good position from a source and use standpoint over the next 12 months. Certainly I think the rationale for the share buyback from our perspective is evident - we’re trading at a 12 to 18% discount to NAV, actually probably a little bit higher on some days, and we felt that given the implied cap rate that the stock is trading at, the absolute price of the stock versus what we think NAV is, that probably one of our better uses of capital at this point is to reflect the reality of the marketplace to where our stock is and to implement a stock buyback program. Certainly as we accelerate this asset sale program, and you may recall from my comments we have a lot of assets on the market for sale, that will create some additional liquidity, either both directly or through the sale of some of these joint ventures, to more than fully meet our development funding requirements as well as fund the share buyback program.

Got you. I guess just to talk about acquisitions, clearly as you said, you’re trading at a pretty big discount to NAV, and you’re looking to continue or to do more acquisitions potentially for the balance of the year. I guess in terms of just uses of capital, from a perception standpoint, how do you view those acquisitions going forward, and do you maybe pump the brakes a little bit in terms of future growth?

Well look, in my commentary we did pump the brakes quite a bit. I think we caveated the fact that they’re in our guidance right now, but that they’re purely opportunistic and based upon funding capacity if we dramatically exceed some of our sales targets and find opportunities in our joint ventures or third parties, like we were able to do with the IBM transaction. That was a challenging transaction for us from the standpoint of we knew where our stock was trading. When we took a look at the underlying growth opportunity that that simplification presented for us, it was really very compelling - I mean, you had existing rents, as I mentioned, 35%-plus below market. We had an aggregate investment base we could buy in at pricing that, quite frankly, is $100 or 30% less than what properties across the street are going to trade for, to be able to buy in some future development capacity on the land adjoining that developed park at an investment base that’s less than $10 in FAR foot versus land across the street trading at $40 to $50 in FAR foot. So from a real estate standpoint, it really presented a very compelling opportunity in terms of creating long-term growth for the company, but it is challenging to juxtapose that against where the stock was and where the stock is. So I think the announcement of the stock buyback plan, as I mentioned in my comments, certainly buying back in our stock, financing that through accelerated asset sales, which is frankly our best cost of capital dollar, and meeting the requirements for the existing development pipeline funding seems to be a very pragmatic way to approach where we are in the cycle right now.

Your next question comes from Rich Anderson with Mizuho Securities.

Thanks. Good morning, everybody. So Gerry, just a follow-up on the buyback, you haven’t changed any targets, leverage metric targets as a result of that, but part of that is maybe because in your guidance, you don’t have any buyback activity. Do you foresee having to do that if you get more aggressive on the buyback program, or do you foresee that your leverage will not be impacted from the decision to buy back your stock?

Look, I think there’s no question when you’re buying back equity, it’s going to have an impact on leverage. The opportunity is to finance that off of asset sales, mitigating that, but certainly as we look at fully executing the program, it would have an impact of about 25 basis points or so on our EBITDA multiple and could raise our debt to GAV by between 1.5 and 1.8%, from an absolute standpoint. That doesn’t factor in other opportunities we may have in terms of bringing these developments online or improving some of our spec revenue targets. That’s certainly something we think about, Rich, but one of the interesting conundrums as a public company, sometimes the public-private market arbitrage presents an opportunity for us. So we think we’re in a recovering market, the company is posting very strong operating metrics, we’ve got some good forward growth opportunities. To the extent that’s not being recognized currently in the marketplace, I think it’s incumbent upon us to recognize that and to utilize capital that we can raise that’s effectively priced to take advantage of this buyback opportunity.

So I should assume the push to guidance would be upward if you start buying back stock?

Yeah, look - I think certainly the leverage would tick up, and we’re very mindful of that as a governor on what we can do; but certainly it does have an impact on FFO and CAD as well.

Your next question comes from Jed Reagan with Green Street Advisors.

Morning guys. I guess one more on the share repurchase authorization. Are you guys thinking about a specific stock price or maybe discount to NAV at which the share buyback program pencils for you guys? How are you approaching that?

Jed, given the range the stock has been and the last trading patterns, certainly is within the range of as the board and management kind of reviewed where we saw the implied cap rate, the price per square foot, kind of all the standard real estate metrics we look at, as well as the ability for the company to accelerate liquidity through additional asset sales. We certainly think that we’re in the ballpark where there’s going to be some implementation.

Okay. So you’ve got, call it $700 million or so in active projects in the hopper on a pro rata basis, and looks like the shadow pipeline behind it is increasing a bit with some of the recent additions. Just wondering if there’s a maximum amount of development you’d consider having in the active pipeline at any one time in terms of an absolute dollar amount, or maybe a percent of operating assets, or maybe would be percent leased by the primary governor on how much you’d move forward on at any one time?

Great question. Look - I think as we look at our existing development pipeline now, Jed, we have FMC that will roll over into 2016. Encino is done essentially by the end of ’15. The Park development with Toll is essentially done and performing incredibly well and will be coming into our earnings next year. 1919 will be in the premarketing phase with all of our equity invested certainly by the end of the year. So the level of development spending we are right now, we expect to be a high point given where we expect our run rate to be going forward. As we look at allocating money to development, it’s a function of certainly percent leased, but also with the pipeline behind that and our read of market conditions. We look at certainly the level of development spend as a percentage of our asset base, and certainly somewhere in that $200 million to $300 million range on a run rate basis seems to make the most sense, obviously subject to market conditions. That’s been a key part of our through process on our land, which is to move out some land at good pricing that doesn’t naturally fit with our landscape, and create a development pipeline for us that’s basically going to be focused on premarketing and planning that would be able to be deployed on a sequential basis over the next four to five years, market conditions permitting.

Okay, thanks. Maybe just one last one, if I may. Just curious if you’ve seen any upward pressure on cap rates recently, just given the changes in treasury yields and borrowing costs.

No, we actually haven’t. In fact, we continue to be pretty positively pleased with the level of pricing that we’re seeing in the market, which I think is one of the predicates behind increasing the guidance. I’m sure it will come at some point, but we really haven’t seen, particularly on the CMBS or the secured lending side, spreads widen to the effect that it creates any kind of underwriting squeeze on the buyers that we’re talking to.

Your next question is from Craig Mailman with Keybanc.

Yes. Just wanted to follow up on your leverage comments, Gerry. You guys are, I guess, about 6.9 times now, but you said you’re comfortable running a little bit higher here longer. What is your upper threshold, and what do you see that top out at and when do you see it come down to the 6.5?

I think the upper threshold is not too far above where we are now. I think we’re certainly--we were north of 7.5 before, we brought it below that, now have it kind of between the high 6’s to 7’s. We knew, though, with this development spend, particularly given the size of the FMC project, we’d have some upward pressure on that. So I don’t think that you’ll see a level of tolerance for much above where we are right now, and we’re going to continue to exercise every effort we can to move towards our stated goals over the next eight quarters or so.

And on FMC, where do you think you need to get leasing before you guys pull the trigger on either a financing or a joint venture?

Well, we’ve got a good prospect list right now, as we alluded to, and certainly expect to make some good progress over the next several months. The residential program has been completely finalized and has been completely priced out, or is in the final stages of being completely priced out. We’re frankly still engaged in some conversations, Craig, with some folks on the residential side. I mean, what we’ve seen happen on the residential front, and I think as you all see nationally, is pretty compelling. What we’re seeing here in Philadelphia is just as compelling, and we’re seeing cap rates kind of in the mid-4’s to mid-5’s. We’re seeing per unit break well through that $500,000 per unit barrier for new construction. Even with the pipeline of development program for rental product in Philadelphia, you’re still going to see the city being fairly underserved in terms of rental units per population. So we actually we’re going to continue to see some very good activity on the FMC Tower residential piece over the next several quarters, but the forward funding complication certainly starts to dissipate once we get into the first quarter of 2016, for sure.

Your next question is from Gabriel Hilmoe with Evercore ISI.

Tom, just on the increased disposition guidance, I don’t know if you mentioned this, but can you give a sense of just the expected timing of those sales in third and fourth quarter? Is it pretty ratable through the year, or should we expect to see a good chunk of those hitting in 4Q? And then I guess when we start to think about 2016, could we see similar levels next year, just given what’s in the market right now and where development spend may trend, and other funding needs you have?

Yeah, I think when we look at the schedule, I think they’re going to come in ratably over the balance of the year. I mean, a lot of the sales are obviously kind of in the 15 to 35, $40 million range, so they’re kind of sequencing in, so not a tremendous amount of lumpiness. Now, we have a lot of properties on the market, so we have no idea how they’ll be received, so that could impact the lumpiness of that pro rata comment. But look - I think when we take a look at our portfolio, looking ahead to 2016, and we’re certainly not pre-announcing any goals for next year, but it’s a fairly good time to be selling the type of real estate we’re trying to move. You’re seeing vacancies reduce across a lot of our core markets. You continue to see an availability of debt financing. You’re seeing a tremendous amount, a wall of $82 billion of equity financing out there looking for a place to land, and from a relative yield standpoint, given the stable to improving economic picture, you’re seeing a lot of institutional appetite for larger pools of types of suburban assets. So we’re certainly exploring all the different options we can to complete our portfolio repositioning plan, create a much better growth profile going forward, and continue to improve the balance sheet.

Thanks. Then maybe going back to Jed’s earlier question, you’ve been pretty active over the last couple of quarters assembling a number of development partials, but as far as the pipeline goes, should we expect to see significant land acquisitions going forward, just given you’re recycling out of some non-core land, selling more assets? I’m just trying to get a sense of how active we should maybe expect you to be buying on the land front.

Look - I think when we took a look at our land inventory as part of our 2015 business plan, the governor there clearly is that 2.5 to 3% of our asset base, so we’ve been very successful in nailing down a number of sites that we can sell to third parties and generate some good capital from that. What we’ve seen in a number of markets is that even though like in a DC market, where you have situations where fundamentals haven’t really moved that much appreciably upward, cap rate compression has been significant, you’re looking at earning assets well above replacement cost, but land prices have been fairly stable. So in that case, we saw there were a couple of good opportunities for the company to partner with two extremely well regarded, great reputation companies with large infrastructures in DC to basically buy a couple of pieces of ground at an average investment base of about $75 per FAR foot, which we think very much compares favorably to comps, both long term and the last 24 months, to present a potential future development opportunity. But given that, when we take a look at the land activity we’ve had this year, I don’t think you’ll see us buy much more land going forward until we recycle some other land to maintain that 2.5 to 3% benchmark, and certainly given the quality of the land that we’ve bought and the price that we bought it at, we think we’ve built a very good 2016 to 2019 development pipeline that we can deploy as market conditions continue to improve.

Your next question is from Jamie Feldman with Bank of America Merrill Lynch.

Great, thank you. You did acquire land in CBD Philly during the quarter. Can you guys talk about your multi-year outlook for that market, given just the moving pieces in terms of big box moving to new space and some of the expirations in that market?

Yes, certainly. I think when we take a look at the big blocks of space, fortunately we’ve been able to capture a lot of it, and I think one of our real focal points, Jamie, was making sure that Brandywine completely saw the 1900 Market block of space, which we’re very, very happy we did. There are a number of tenants moving around the market, so George, maybe you can walk Jamie through.

Yeah, I think as Gerry said, our rollover risk has pretty much been mitigated. The competition from vacant space today really comes from Mellon Bank Center, and then there are a number of tenants in the market - you know, Radeon is 160,000 square feet, Montgomery McCracken, a law firm, 100,000 square feet, several other law firms in that 40 to 60,000 square foot range. So again, I think where we stand today leased, but more importantly where we stand in terms of rollover risk, I think we feel good on the near to midterm picture for our holdings downtown.

I guess my question is more--you know, you’re acquiring more land downtown. What are your thoughts on how the market unfolds over the next couple of years, and when you’d actually be able to put that to use? What’s the vision here?

Yeah, I think the vision here is between the parking garage we bought over on East Market Street and this recent land acquisition, which again as I mentioned will be deployed initially for parking, we do view that they present good intermediate term development opportunities for us. Certainly the 2100 block on Market, we view to be very much of a mixed use development. It will have the component of structured parking. That Carter on West Market Street is evolving very, very nicely. We think there is a niche play for some loft office space on that marketplace, so it would be something different than the market presented, not too dissimilar from what we saw with 1900, where that project is very different than what’s available within the existing inventory stock, and the level of activity and the rental rates that we’ve seen on that have been extraordinarily strong. Then certainly, the ability to use a portion of that land site for residential construction with one of our existing or new residential partners, certainly we think fits very well into creating a 24/7 type of neighborhood along West Market Street.

Okay, and if I could ask the same question on DC, thinking about the parcels you’ve seen, and we’ve seen somewhat of an improvement in leasing activity in that market. How do you think about the sites you have now?

Yes, look, I think the sites we have right now, we spent a lot of time looking at where we wanted to try and make a land position in DC, and certainly we think the riverfront section and NoMa are very well positioned for future growth. As I mentioned, a key driver for us was the investment base per square foot that we were able to buy in the land, and then also a very key issue for us is how we structured those deals with, we think, two very, very high quality organizations like JBG and Akridge there. They are solid companies with a great reputation for excellence and high quality development. They augment our talent pool perfectly to mitigate any execution risk and to accelerate market penetration through their existing infrastructure in terms of broker contacts, contractor knowledge, et cetera. So again, we laid out in the supplemental, we think that the first phase of the JBG deal could go as early as midyear next year, but the other two sites, Jamie, are really functions of where preleasing is. What we like about that market is the fact that those same demand drivers that I alluded to earlier in terms of multi-modal access, high quality, efficient space has certainly been a key driver as some of the tenants have moved around Washington, DC. So we think that the location of those sites, the development plans we’ll put forth, our overall investment base and our target yields present a very attractive alternative to tenants who are looking for space to either relocate within that market or expand in those markets.

Your next question comes from John Guinee with Stifel.

Okay. First and foremost, I don’t know if you guys know this, but you have probably evolved to having the best supplemental in the industry, so congratulations on that. Just as a curious aside, you’ve got so many moving pieces that we’re all having trouble keeping track of it. At the end of the day, what’s the impact on your taxable income and your dividend from all of this? Where can you 1031, where can’t you, et cetera?

Hey John. We do track our 1031s as we look at these gains and losses. Depending on the markets and the transactions, we’ve had several that have created, especially some of the newer acquisitions we did as part of maybe the merger. Those assets have higher bases, so we’ve been able to see some tax losses. Some of the assets that are older, that are legacy, we do have tax gains. Right now, the way we look at this year and sort of some of the things that are in the market, taxable income, we don’t have a pressure point on that. That said, we are also looking at 1031s. In fact, we used a 1031 vehicle as it related to the IBM transaction, which made that very incremental to helping keep taxable income down, so using the proceeds from Lake Merritt to fund that acquisition and defer gains. So we are mindful of it, and we have a tracking mechanism on everything we’re looking at and selling.

Okay, and then as just sort of a curiosity follow-up, I’m not sure if you mentioned this last quarter, but I noticed that the DRA JV and the Philadelphia area went into forbearance, I guess, in the first quarter. How are you looking at that asset, what is going to be the end result? It doesn’t show up--I don’t think it shows up anymore in your statistics.

No actually, John, we sold that portfolio into that venture a number of years ago at a pricing level that is above what they’re going to realize from the sale today. We really had no investment base in that venture. We were managing and leasing it. We’ll manage and lease it through the ultimate sale to the third party in a--I think as early as August, next month. So it really didn’t have that much of an impact on our financials, or had no impact on our operating metrics or occupancy levels, and we really weren’t getting any income from that for a number of years. It was more just an incentive management fee arrangement that will come to a conclusion when that asset is conveyed, or those assets are conveyed.

And John, also, we did take it out of our stats at the end of the fourth quarter. That loan, I think we disclosed went into a forbearance period, so we no longer had any obligation towards the loan. The forbearance put the lender clearly in responsibility for all capital calls and responsibilities for all capital disbursements, as well as cash disbursements, so at that point we took the related--and we knew that we wouldn’t be getting--and we at that point also, John, turned off the FFO and CAD numbers. So we stopped recognizing at the end of the fourth quarter any FFO or cash flow contributions because of the forbearance, as well as took the obligation of the debt out of our pro rata calculations and combined calculations.

Your next question comes from Manny Korchman with Citi.

Hey, it’s Michael Bilerman with Manny. Gerry, I wanted to come back to your views on the stock price relative to NAV and both issuing and buying the stock. So if we dial back a little less than a year ago, you issued the stock at $16.10 net, to Brandywine $15.35. Your NAV was broadly around the same level is it today, give or take maybe $0.10, $0.15, so call it about $16, $16.20, somewhere in that ballpark. I guess how should we think about you trading around your stock versus trying to drive NAV, or secondarily being a little bit more aggressive and thinking about strategic alternatives?

I think one of the reasons we announced the share buyback program is the stock has certainly underperformed since the beginning of the year, and that’s been disappointing for sure. Our overriding objective, like every company should be, is to create positive NAV price currency and to maximize value. We continue to have a lot of positive constructive dialog with our shareholders, analysts who follow the company, prospective investors, and we’re hoping to execute a plan that will hopefully return us to our three or five-year share performance track record, where we were performing much better than we have been the last couple of quarters from a stock price standpoint. At three-year, we were in kind of the top quartile of our peer group, and really since the beginning of the year the stock has not done as well as we would like. There is certainly--as a framework, we all know there’s a lot of macro forces at play there, but the reality is its incumbent upon to continue to post good results, and that’s what we’ve been trying to do. We’ve continually improved our operating metrics, posted strong occupancy gains, retention gains, improvements to same store, mark to market gains, all the while controlling our capital costs. I think on a number to number basis, I think we’re performing very well relative to other companies in our sector. We’ve also aggressively repositioned our portfolio to stay ahead of the changing office landscape, significantly shifted our portfolio into more growth oriented product and markets. I mean, look at the numbers George walked through on Philly CBD - I mean, those mark to market numbers are very strong and certainly on par with a number of other very strong markets around the country. We’ve repositioned our land base to create better growth opportunities rather than sitting on the same land inventory year after year, and I think we’ve created good liquidity. We’ve reduced our average cost of debt, extended our debt maturity schedule, all in the context of trying to keep us on a path towards lower financial leverage. But we’re at a stock price today where we think our best source of capital is continuing to accelerate asset sales, which also have a corollary benefit of better positioning the company. It’s a good market to sell, and we plan on doing that to fund our forward growth opportunities, improve our near term growth rates, and take advantage of this dislocation between our public and private market values. All that being said, I think the board and the management team are in the business to make money for our shareholders, maximize value, so we remain very constructive and very positive in looking at all the different options that present themselves to the company. We think the path of repositioning the company, accelerating asset sales, taking advantage of a strong private capital market will continue to pay us good dividends as we move forward over the next few quarters.

But if you were to dial back to late last July, right, where you issued stock net to Brandywine at a cost of $15.35 a share, gross at $16.10, I guess part of that embedded into your view was you were willing to raise capital at those levels. I don’t think NAV has materially changed from July of last year to today, unless you tell me that there’s been a lot of NAV value creation since then. So I agree with a buyback and trying to narrow this disconnect, but I think that there’s some concern that the minute the stock gets back up to that level, you’ll go back and issue a lot to fund the big development pipeline or other sort of growth initiatives, and you sort of get into this wheel.

Well look, I think as we kind of assess it, we certainly look at over the last 12 months, we certainly think that we’ve increased our NAV. If you take a look at almost every single metric that governs value creation - length of lease, annual growth rates, forward growth rates in the markets we’re in, we think at a real estate fundamental level we’ve done a very effective job of growing NAV at a rate that we think exceeds what market growth rates have been. So to your underlying, I think, assumption about stable NAV, I think we do look at that on a forward basis both in terms of the existing portfolio as well as the near term development pipeline, I think we’ve been in a value creation mode from an NAV standpoint. You know, when we look at our forward growth opportunities, I think certainly one of the situations every public company goes through is when you think your stock price is at a point where you have an opportunity to expand your equity base to create more accretive acquisitions, you should do that - that’s one of the reasons why you’re a public company. But the governor to that, to a great degree, is what you can do with your existing portfolio, and I think if you take a look at our track record over the last few years, we’ve basically sold over a billion dollars of real estate at fairly good cap rates, certainly cap rates inside of our financial model, and have used that to both fund growth opportunities. Certainly one of our driving predicates is to continue deleveraging the company, so asset sales, simplifying these joint ventures, fully leasing our development pipeline, I think they’re all part of the algorithm to kind of create a good forward growth model that will be reflected well in the stock price.

Your next question comes from Brendan Maiorana with Wells Fargo.

Thanks, good morning. Gerry, if you look out long term, let’s say three years, five years - pick your time frame, how much in terms of assets in the portfolio, that are in the portfolio now, do you think you don’t want to own from a dollar perspective?

I think we’re probably close in on kind of a $300 million to $500 million range, but I do want to caveat that, though, because it’s important. The ability to actually harvest value out of newly created assets is not lost on us, either, so I wouldn’t necessarily just say that there’s a segment of the portfolio that we don’t want to own going forward. I mean, we’ve made it very clear that we’re exiting our New Jersey, Delaware marketplaces. Long term, we look to exit the 270 Carter in Maryland. We’ll be exiting a large portion of our asset base in Richmond, Virginia. California is just about done. We’ve culled the number of assets out of our Pennsylvania suburban division, so I think we kind of let the numbers drive that thought process, and we do anticipate where we want to get to is a portfolio that’s much more mass transit oriented, much more town center focused, higher quality, larger buildings that are more effective to manage, continue to maintain significant submarket share, because even as George mentioned, one of the great things about what we’ve seen happen in Philadelphia is you’re actually seeing a number of tenants move back into the marketplace--when I say move back into the market, move back into the city. We were able to capture 40% of companies moving back into the city - that’s coming from a lot of the synergies, broker network, tenant connections we have that give us, we think, a very strong competitive advantage [indiscernible] one or different assets. So we’re very mindful as we look to fine tune the portfolio of what submarkets we want to remain in and what that competitive set needs to be.

So where I was kind of going with this is you guys have--you know, you’ve got a subset of the portfolio that you probably look at over time as not fitting within the current Brandywine strategy, and you’ve got leverage which has moved higher than what your medium or longer targets are, although you’re comfortable operating there for a time. But you also have over the next three quarters, through the end of Q1 of ’16, you’ve got $450 million of debt that comes due at an average interest rate of 4.8%, so it seems like you’d have this opportunity to, if you took all that debt and you decided to pay it off with dispositions and looked at that in isolation, it feels like you could get your leverage, the debt to EBITDA down to that 6x number, which was long term as you sort of thought about. I would think it wouldn’t be that dilutive to earnings, depending on the cap rate that you did, and probably even less dilutive to cash flow. I wonder if you think about that as maybe you could come out with a large portfolio, sell the assets, reset the balance sheet, reset earnings down a little but not a lot, and then be in really good position to think about normal asset recycling, that I think if you were doing that it would be very accretive to earnings over time. Is that something that you guys think about with this slug of debt that’s coming due over the next few quarters?

Brendan, I think it’s an excellent observation. It’s something that we think about and spend a lot of time thinking about how we’d kind of move in that direction. Again, I think if you take a look strategically, the company wants to be a much stronger balance sheet over time. We want to have much higher quality assets. The market to sell today is very good, whether you’re selling off of actual cash flow or pro forma cash flow in some of these markets. So I do think, and I tried to amplify that in my comments, as did Tom, we have a lot of properties in the market. We are engaged in a whole range of discussions with investors, so I certainly would not preclude our ability to exceed that $300 million target and use those proceeds to both provide support to our stock price, but also to handle our near term maturities on a debt basis. I think it’s a very good point - thank you.

Your next question is from Rich Anderson with Mizuho Securities.

My question has been answered, thank you.

Your next question is from Jed Reagan with Green Street Advisors.

Yes, just a quick follow-up here. Can you talk about how economics came in on the 1900 Market Street lease versus your initial underwriting?

We can. It came well above our original underwriting, and as I mentioned, it’s a significant cash and GAAP mark to market. Capital was very much in line with what we had projected, and the absorption pace I think was much greater than we expected, so we’re very pleased with it. As I touched on the comments, we’ll be delivering that project at north of a 10% free and clear return on fully loaded costs, so I think it’s a great transaction to get that lease put away, but also I think we’re really pleased with the level of activity we’re seeing for the balance of the space, and we think that gives us an opportunity maybe even to push rents a little bit more.

Okay, great. Then on a percent leased basis, you’re now at sort of the high end of your full-year goal, so just wondering if you think you’ll be able to hit maybe the high end of that guidance as we get through the end of the year, or are there some larger move-outs we should be cognizant of in the back half of the year that maybe gets you closer to the middle or lower end?

Yes, on the occupancy, I think we’re comfortable that we’re going to be at that high end. I think on the forward lease percentage, again we’ve got a lot of transactions in the pipeline that we think we’re 93 occupied and ultimately 94 leased come the end of the year as well. So we have some known move-outs, but then we also have 600,000 square feet of forward leases still to commence.

Any lumpy move-outs worth noting?

No, a couple of give-back floors, but nothing of note.

Okay, great. Thanks guys.

Your final question comes from John Guinee with Stifel.

I’m glad this is the last question. So you sold stock at $16 a year ago, and you’re going to maybe buy it back at $14 now, about 7 million shares. You’ll probably create $0.10, $0.15 a share in value just by doing that for your remaining 175 million shares outstanding, and you’re finding yourself defending that strategy?

We think it’s a good strategy.

No, I know. Nothing more to be said. Thanks.

Thank you, John.

There are no additional questions at this time.

Great. Thank you all very much for participating in the call. We really do appreciate the engagement and the questions. Sorry it ran a little bit over. We look forward to continued progress and updating you on our next quarterly call. Thank you very much.

Thank you. Ladies and gentlemen, this does conclude today’s conference call. You may now disconnect your lines.